Correlation Between Capital One and Xp

Can any of the company-specific risk be diversified away by investing in both Capital One and Xp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capital One and Xp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital One Financial and Xp Inc, you can compare the effects of market volatilities on Capital One and Xp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capital One with a short position of Xp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Xp.

Diversification Opportunities for Capital One and Xp

0.08

Correlation Coefficient

Capital One  Xp

Significant diversification

The 3 months correlation between Capital and Xp is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Xp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xp Inc and Capital One is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capital One Financial are associated (or correlated) with Xp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xp Inc has no effect on the direction of Capital One i.e., Capital One and Xp go up and down completely randomly.

Pair Corralation between Capital One and Xp

Considering the 90-day investment horizon Capital One is expected to generate 11.33 times less return on investment than Xp. But when comparing it to its historical volatility, Capital One Financial is 1.15 times less risky than Xp. It trades about 0.01 of its potential returns per unit of risk. Xp Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,218  in Xp Inc on December 26, 2024 and sell it today you would earn a total of  247.00  from holding Xp Inc or generate 20.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Capital One Financial  vs.  Xp Inc

Capital One Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Capital One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Xp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and Xp

The main advantage of trading using opposite Capital One and Xp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Xp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Xp will offset losses from the drop in Xp's long position.

The idea behind Capital One Financial and Xp Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.